Brown scraps tax relief for homebuyers

Revealed: Labour's Budget secrets

The Chancellor of the Exchequer, Gordon Brown, will slash mortgage interest tax relief for home-buyers in his Budget on Wednesday to choke off a housing boom that threatens to overheat the economy.

In Labour's first Budget for 18 years, he will reduce sharply or even announce the phased abolition of the long-standing benefit for owner- occupiers. Home-buyers will have to find up to pounds 30 a month more.

Mr Brown is also looking at increases in stamp duty on house purchases to bring in extra revenue and damp down soaring home prices in many regions. It is thought he could raise the pounds 60,000 threshold at which stamp duty becomes payable but then double, to 2 per cent, the rate at which it is charged.

The Treasury decision to go for the housing boom hardened last week after the publication of figures showing the economy was growing faster than expected, fuelled by a High Street spending frenzy linked to home-buying.

The Chancellor will reduce the scope of mortgage interest tax relief, currently worth pounds 30 a month to home-owners, and is expected to signal an end to the owner-occupiers' "perk" that Margaret Thatcher always protected from Treasury attack.

However, he has the support of influential bodies, such as the Institute of Directors, which have urged him to get rid of the state "subsidy" of mortgages which distorts savings decisions. Abolition would bring in an extra pounds 2.3bn a year, though the benefit could be phased out rather than abolished in one fell swoop.

The monthly cost of a pounds 50,000 repayment mortgage with 15 per cent tax relief on interest is pounds 358.86. This rises to pounds 368.79 with relief at 10 per cent, pounds 378.74 with relief at 5 per cent and pounds 388.66 with no relief.

Stamp duty kicks in at pounds 60,000 but the Chancellor could increase this threshold to perhaps pounds 100,000 and then charge 2 per cent. House prices above this level, particularly in London and the South-east, are rising fastest and such a move would have a dampening effect.

Apart from mortgage tax relief, Labour's "budget for the long term to equip Britain for the future" will impose the long-heralded windfall tax on the privatised utilities, including British Telecom and BAA, the airports company. It will raise an estimated pounds 5bn in a one-off levy to pay for Mr Brown's welfare-to- work programme, aimed at getting 250,000 young people and long-term jobless out of the unemployment figures.

The Chancellor will also redeem his election pledge to reduce VAT on domestic fuel from 8 per cent to 5 per cent and could take specific steps towards his promise to introduce a 10p-in-the-pound starting rate for income tax. The VAT cut will take place before the winter and the estimated pounds 400m cost will be paid for by the abolition of tax relief on private medical insurance for the over-60s.

Mr Brown could take more money out of the nation's pay packets by altering the ceiling on National Insurance contributions. Contributions are levied at 10 per cent on earnings up to pounds 24,180. Anything above that ceiling is exempt.

Senior party sources expect at least two "green" taxation measures, including a substantial increase in fuel excise duty.

Other plans could include the taxation of company car-parking perks.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooksA special investigation by Andy McSmith
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
Life and Style
A statue of the Flemish geographer Gerard Kremer, Geradus Mercator (1512 - 1594) which was unveiled at the Geographical Congree at Anvers. He was the first person to use the word atlas to describe a book of maps.
techThe 16th century cartographer created the atlas
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: UI / UX Designer

£25000 - £35000 per annum: Recruitment Genius: This firm are focussed on assis...

Recruitment Genius: General Processor

£7 per hour: Recruitment Genius: A vacancy has arisen for a General Processor ...

Recruitment Genius: Outbound Sales Executive - B2B

£18000 - £22000 per annum: Recruitment Genius: A great opportunity has arisen ...

Recruitment Genius: Online Sales and Customer Services Associate

£14000 - £16000 per annum: Recruitment Genius: Full time and Part time positio...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot